The mood in Brazil is one of disgust and rebellion against the traditional political class, creating the possibility of an outsider, left or right, winning next year's election, experts say. Here the Saara shopping area of Rio de Janeiro. (Photo: City of Rio de Janeiro)

Latin America: Elections Promise Change

Half of Latin America – including Brazil and Mexico – to see presidential elections.

BY JOACHIM BAMRUD

Latin America is facing an uncertain political outlook the next two years, with elections being held in ten countries.

“Presidential elections are likely to reshape Latin America’s political landscape over the next two years,” says Michael Shifter, President of the Inter-American Dialogue. “In the context of widespread disenchantment with politic\al leaders and institutions in many countries, “outsiders” with strong change messages can be expected to gain ground. The status quo in several countries could well be upended.”

Still, the most critical elections will take place next year in Brazil and Mexico – the region’s largest economies, he points out.

“After the longest recession in history and amid an unprecedented and still unfolding political crisis, it is hard to say who Brazil’s main candidates will be -- much less predict who will win,” Shifter says. “The situation is uncertain and offers fertile ground for an anti-system, nationalist political figure.”

“The mood of the country is one of disgust and rebellion against the traditional political class," he says. "That creates the possibility of an outsider, left or right, winning the election."

BRAZIL AND MEXICO

Brazil is scheduled to hold elections in October next year. Current president Michael Temer -- who has followed pro-investor policies -- will not run as a candidate. He became president in May last year after then-President Dilma Rousseff was ousted (and later impeached) over budget violations. Temer, who had been Rousseff’s vice president, is scheduled to serve out Rousseff’s mandate, which ends in January 2019.

Rousseff’s mentor and predecessor, Luiz Inacio Lula da Silva, is hoping to run and is leading several polls. However, he also faces several criminal investigations related to the Petrobras corruption scheme that could land him in jail before the elections.

Meanwhile, in Mexico outside factors such as US President Donald Trump’s attacks against the country are playing a major role ahead of its elections planned for July next year.

“The Trump effect on election outcomes in Mexico is a special case, as Mexico has borne the brunt of the President’s harsh rhetoric--build the wall, renegotiate NAFTA, crack down on immigrants,” says Cynthia Arnson, Director of the Latin American Program at the Woodrow Wilson International Center for Scholars.

Pervasive disappointment with what was widely touted to be the “new PRI”, together with Trump’s insults aimed at the country and its people, are boosting the chances of leftist Andres Manuel Lopez Obrador to be the next president, Shifter says.(See Mexico: The Leftist Threat).

Apart from Brazil and Mexico, other countries like Chile, Colombia, Costa Rica, Ecuador, Paraguay and Venezuela are scheduled to hold presidential elections the next two years.

Meanwhile, Cuba – a one-party state with no free elections – is scheduled to see current president Raul Castro leave office in February 2018, handing power to vice president Miguel Diaz-Canel, who will formally be elected by the island’s one-party congress. Expectations are high that Diaz-Canel will implement more radical economic reforms that Raul Castro. (See Cuba After Fidel Castro)

ECUADOR: CHANGING COURSE?

First up is Ecuador, which is holding its second round of presidential elections on April 2. Polls show a tight race between ruling party candidate Lenin Moreno and opposition candidate and business favorite Guillermo Lasso.A Lasso victory would be warmly welcomed by local and foreign investors. It would also likely reduce the number of claims against Ecuador in international courts, experts say.

“The country is at an interesting crossroad,” says Jose Astigarraga, Founding Partner ofAstigarragaDavis and a leading expert on Latin American arbitration issues.

Moreno is of the same political party as current President, Rafael Correa, whose administration’s policies led to a number of claims against the state, alleging violations of investment protections under international law and the country ultimately even withdrew from The World Bank’sInternational Centre for Settlement of Investment Disputes (ICSID), he points out.

“Lasso, on the other hand, is center/right-of-center and seems to be pro-market and to favor entrepreneurship,” Astigarraga says.“You would think that his polices are less likely to result in claims of violations of investment protections, so the number of investor state cases against Ecuador could be expected to diminish should he be elected.” (See also Latin America: The Arbitration Outlook).

This year will also see elections in Chile and Honduras, both in November. In Chile, former president and business favorite Sebastian Piñera is leading polls against rival Alejandro Guillier, an independent leftist senator and former journalist. Piñera is expected to reverse the tax and labor reforms implemented by outgoing president Michelle Bachelet – two reforms that were harshly criticized by the business sector.

In Colombia, Germán Vargas Lleras, who served as vice president of outgoing president Juan Manuel Santos until March 15, is leading polls. The opposition Centro Democratico – founded by former president Alvaro Uribe – has yet to choose a candidate, but could perform well. Uribe remains the most popular politician in Colombia, but is prohibited from running for the presidency again.

“Local contexts are always the most important in determining electoral outcomes, but several regional trends play a role,” Arnson says.“Economic growth in the region as a whole continues to be anemic, putting at risk the gains of the ‘golden decade’ of the 2000s.That creates difficulties for incumbents.In political terms, the burgeoning corruption scandals in so many countries have the potential to further alienate voters from the existing system, favoring either outsider candidates or those with impeccably honest credentials.”

In Colombia, for example, the Odebrecht corruption scandal has been linked to both Santos and his top rival in the last elections, Oscar Ivan Zuluaga from Centro Democratico, who many experts had expected would be a strong candidate in 2018.

VENEZUELA: GRIM OUTLOOK

And then there’s Venezuela, which has yet to set a date for the next presidential elections. But they are expected for late 2018 or early 2019. However, they may be worthless unless the opposition has a real chance to win power.

“It is doubtful that the Chavistas are suicidal,” Roett says.“All of the efforts to convince the government to hold free and fair elections have failed.”

Shifter agrees.

“Unless there is a major turn of events and a radical change in Venezuela’s power structure, free, fair and open elections are highly improbable,” he says.“The government has shown it is prepared to do nearly anything to stay in power.After all, Chavismo refused to accept the outcome of the December 2015 election by stripping the national assembly of all of its powers.It also cancelled local elections.”

A variety of dialogue efforts promoted by actors in the international community, including the Vatican, have failed; and as the regime’s support has plummeted, it has grown more repressive and authoritarian, Arnson points out.

“The regime prevented a recall referendum from taking place mid-way through President Nicolás Maduro’s term, knowing that it would lose the vote,’ she says.

The scathing report by OAS Secretary General Luis Almagro — together with his call to invoke the Inter-American Democratic Charter -- has upped the ante, and a majority of Latin American countries are now pressuring for a democratic solution, Arnson says.

However, while an electoral outcome is desirable, it is hard to imagine a scenario in which it will occur any time soon, she acknowledges.

Meanwhile, the opposition continues to be too divided, Roett argues.

“The outlook remains grim with the average Venezuelan baring the burden of incompetent government and stupid public policies,” he says.

THE ODEBRECHT IMPACT

The Odebrecht bribe scheme managed to tarnish politicians throughout Latin America. In Peru alone, two former presidents – Alan Garcia and Alejandro Toledo – have been accused of taking bribes.

After Odebrecht CEO Marcelo Odebrecht was implicated in corruption at state oil company Petrobras and jailed, he agreed to testify in exchange for a reduced sentence. As a result, he revealed the company’s payments of nearly $800 million in bribes to get contracts throughout Latin America and in Africa.

Odebrecht agreed with U.S. authorities to a $4.5 billion penalty for violating the US Foreign Corrupt Practices Act (FCPA), but it said it could pay only $2.6 billion, according to Bloomberg.

The final number would be determined at an April 17 hearing in New York and could be higher or lower than $2.6 billion. In either case it will likely be a new record for an FCPA fine. The previous record was held by German conglomerate Siemens, which paid $800 million.

“The jailing of elites--politicians and business leaders--is a game-changer and reflects changing attitudes, as well as capacities of institutions to hold people accountable,” Arnson says.“Odebrecht stands out given the sheer size of the company and the number of countries in which it was involved.Public disgust with corrupt practices has perhaps never been higher, providing an incentive for reform.But the vast differences in institutional capacities throughout the region, and their outright weakness in many settings, could allow cynicism and desencanto to deepen if little ends up changing.”

The actions of Judge Sergio Moro – who has spearheaded the so called “Car Wash” probes into corruption at Petrobras -- will have an important impact in Brazil, in the short term; but the opportunities for self-aggrandizement, particularly in mineral rich countries, is too tempting for most public figures, Roett believes.

“Corruption, unfortunately, appears to be in the DNA of the political class in most countries,” he says. “So the prognosis is pessimistic as long as judicial systems are week or compromised and legislatures look the other way with little public accountability.”

Shifter agrees.

“The Odebrecht case and its staggering transnational reach is no doubt a highly significant development in the region’s fight against corruption,” he says. “In political terms, however, it is little more than the latest in a long series of scandals that have rocked governments in almost every country. There’s not much to suggest that they will have a different impact than the previous scandals:fuel anti-establishment anger and public discontent.”

The key question is whether political leaders and policymakers will be able to channel the bitter mood into enduring and meaningful reforms that close the door to corruption, Shifter asks.

“If not, the Odebrecht case may be a deterrent – but only for some time,” he says. “Sadly, when it comes to corruption, memories tend to be short.”